1. Examining Financial Crime Risks in Trade Finance
Tod Burwell
President & CEO, BAFT
April 23, 2015
GTR Trade & Commodity Finance Conference
Jakarta, Indonesia

2. BAFT – Bankers Association for Finance & Trade
BAFT is the leading global association for International Transaction Banking. It helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency and commercial growth.
Thought Leadership & Best Practices
Advocacy
Training & Education
Global Community

3. Financial Crime - Overview
Money Laundering
Trade Based Money Laundering
Sanctions
Terrorist Financing
Cybersecurity
Fraud
Tax Evasion

4. Money Laundering
Criminals launder 2-5% of global GDP annually (USD Trillion)
80% of illicit flows from developing countries use trade-based schemes
USD101 Billion illicitly smuggled into China via export over-invoicing, and an additional US$54 billion flowed in illegally in the first quarter of 2013 alone

5. TBML Practices Over/under invoicing Multiple invoicing
Over/under shipment
Misrepresentation of goods
Cash / money exchange networks to circumvent banking controls

6. Financial Crime – Regulatory Response
Massive fines and settlements
Cease & desist orders / ongoing monitoring
Suspension of clearing authority
Revocation of export licenses
Personal accountability for executives
Cross-jurisdiction cooperation
Extension of regulatory authority

7. Trade Transparency Units
Designed to examine international transactions to identify trade anomalies and financial irregularities indicative of TBML, customs fraud, contraband smuggling, tax evasion, and contravention of international sanctions.
TTUs are active in USA, Argentina, Brazil, Colombia, Mexico, Panama, Paraguay, and the Philippines.

8. Financial Crime – Bank Response
Board level priority
Increase in compliance staff, investment in IT
De-risking: 1 in 3 surveyed banks exited correspondent relationships
68% of banks declined transactions due to AML/KYC concerns
61% of banks noted AML/KYC requirements are a significant impediment to providing credit

9. Compliance Best Practice
Compliance Culture
KYC / CDD
Policies & Procedures
Screening
Audit
Risk-based Approach

10. Suspicious Activity – Red Flags
High risk jurisdictions / free trade zones
Activity unrelated to core business
Inconsistent transaction structure / tenor
Involvement of unrelated parties
Dual-use goods
High-value / low volume goods for resale
Obvious misrepresentations of price
Substitution of documents

11. Evolving Sanctions Iran Syria Iraq Cuba Russia/Ukraine
Counter-terrorism / non-proliferations
Cyber-related

12. FATF Report - Indonesia
Improvements
Criminalization
Freezing of Assets
Deficiencies
FATF
Cash-based
3rd Party A/Cs
Corruption

13. Q & A Tod Burwell President & CEO, BAFT 1120 Connecticut Ave. NW
Washington, DC 20036
O: (202) E: W: